Richard Campo, founder and managing director of mortgage and protection advisors Rose Capital Partners, shares his advice on making home improvements when remortgaging
Photo credit: The Appliance Judge
The most common reason for raising cash from your remortgage is to make home improvements. Subject to there being enough equity in your home, and the loan being affordable, every lender is happy for you to remortgage for this purpose.
The rationale is simple. By increasing the value of your home, or at the very least maintaining it, you are improving the security on their loan as well. In London and the home counties the adage goes that if you spend £1 on your property, you get £2 back in value. So, £50,000 of work would equal a £100,000 boost in value. Which, again, just adds to why banks are so keen to help you with your remortgage to this end. Naturally the actual change in value will vary based on your property and the work done but it is a useful rule of thumb.
Below are a few key considerations with links to more detailed reading should you be so inclined:
Converting your loft
– The perennial big winner where this is possible. It may even be something you have an eye on when buying a property. As this article from the Guardian suggests, you can add as much as 20% to the value of your home from this alone. According to Zoopla the average London house price stands at £652,828, which would make for an increase of a whopping £130,565! That more than backs up the adage of the £1 of work adds £2 in value mentioned above.
Level of Work
– Most banks have no issue raising money on your remortgage when doing ‘non-structural’ works (usually defined as up to and including most loft-conversions). However if you are planning on digging out a basement or removing a rear wall, you may well need your current or new lenders approval. So tread carefully and get expert advice before proceeding. We have seen clients in the past start some work and not tell the lender, only to then get unstuck half way through the process. Don’t put yourself in that situation: we can always find the right lender for the work you want to do!
Do’s and Don’ts
– We are certainly no experts on this, but this is an excellent article I send to my clients when they ask what they should do to increase the value of their home. This is worth a read as there are more quick wins than you may realise.
Do I need to remortgage to raise the money?
– In a word, no. You can stay with your lenders and wrap the lending up in a new deal (this is called a product transfer) or simply have an additional loan called a further advance. Again, we can organise this for you and often on better terms than if you went to your bank directly. I know that may seem odd, but please do call us to check. If nothing else, we can do this on your behalf as the rate will at least be the same or less and you don’t have to deal with your bank- always a bonus!
This is by no means exhaustive, and as mentioned above we would strongly advise that you speak to an independent advisor before taking any lending or starting work as it can make the whole project run more smoothly.
We are always on hand to help our new and existing clients through this process as it can add a lot of value to your home and is another step to getting you debt free faster if planned correctly. To explore this in more detail, please do contact one of our advisers today.
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